Toto Company has the following data available:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Average total common shares outstanding in 2012 1,000
Market price per share, December 31, 2012 $75.00
Preferred dividends declared during 2012 $2,000
What are the earnings per share for the year ended December 31, 2012?
A) $2.00
B) $5.30
C) $6.30
D) $7.30
Southern Chicken is expanding the menu items offered in order to increase profitability.
Management will evaluate the profitability of each new menu item after six months.
Menu items that are profitable will be retained and the others will be discontinued. On
the part of management, the evaluation and subsequent actions after six months is an
example of ________.
A) management auditing
B) internal auditing
C) planning
D) control
The Matthew Company makes tables for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 17 pounds $5.20 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in May, but 220 tables were actually completed.
Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct labor price variance for the month of May?
A) $1,180 Favorable
B) $1,180 Unfavorable
C) $1,200 Favorable
D) $1,200 Unfavorable
Within the relevant range, the total amount of ________ cost changes in direct
proportion to changes in the cost driver. Within the relevant range, the total amount of
________ cost does not change in direct proportion to changes in the cost driver.
A) fixed; variable
B) variable; fixed
C) step; mixed
D) mixed; step
________ costs can be eliminated from a product. ________ costs cannot be eliminated
from a product but can be reduced.
A) Value-added; Non-value-added
B) Non-value-added; Value-added
C) Resource; Activity
D) Activity; Resource
Budgets that focus on the budgeted cost of activities required to produce and sell
products are called ________.
A) strategic budgets
B) master budgets
C) activity-based budgets
D) rolling budgets
The financial performance of a segment manager is evaluated by ________.
A) contribution margin of segment
B) contribution margin of segment less fixed costs controllable by others
C) contribution margin of segment less fixed costs controllable by segment manager
D) contribution by segment
Elmbrook Hospital uses a job-order costing system for all patients who have surgery.
The following information is available:
Budgeted indirect costs—pre-operating room $84,000
Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500
The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate
for indirect costs. A patient spent 8 hours in the pre-operating room, 4 hours in the
operating room and 96 hours on the surgery recovery floor. What amount of indirect
costs will be applied to this patient?
A) $336.00
B) $600.00
C) $7,680
D) $8,112
The following information is available for Stonefield Inc. and its two divisions,
Crushed Stone and Fieldstone.
Whole Crushed
Company Stone Fieldstone
Net sales $100,000 $50,000 $50,000
Fixed costs controllable by
Division Manager 16,500 12,500 4,000
Fixed costs controlled by others 8,000 5,000 3,000
Variable costs:
Cost of merchandise sold 24,500 17,500 7,000
Operating expenses 16,400 10,000 6,400
Unallocated costs 1,000
What is the contribution controllable by the manager of the Fieldstone Division?
A) $29,600
B) $32,600
C) $36,000
D) $36,600
When preparing the budgeted income statement, which of the following is the source
for the amount of sales?
A) sales budget
B) purchases budget
C) operating expense budget
D) schedule of cash collections from customers
Garcia Company has two service departments, Maintenance and Human Resources.
Garcia Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
Assume the step-down method is used to allocate service department costs. Which
department should be allocated first?
A) Maintenance
B) Human Resources
C) Mixing
D) Finishing
Under accrual basis accounting, we record expenses when ________.
A) a company pays cash to a supplier
B) a company incurs a liability
C) a company uses resources
D) a company pays cash to anyone
Which of the following items is NOT a relevant cash inflow or cash outflow when
using the net present value method? (Ignore income taxes.)
A) acquisition cost of new equipment at time zero
B) future disposal value of a long-term plant asset
C) future operating cash inflows from a long-term plant
D) depreciation expense in future periods
Michael Company has a sales budget for next month of $300,000. Cost of goods sold is
expected to be 50% of sales. All units are paid for in the month following purchase. The
beginning inventory is $10,000 and an ending inventory of $12,000 is desired.
Beginning accounts payable is $76,000. The purchases for next month are ________.
A) $138,000
B) $140,000
C) $150,000
D) $152,000
A plant asset of $180,000 is expected to generate $80,000 in operating cash savings
(excluding depreciation expense) annually for three years. Assume straight-line
depreciation is used. The useful life is 3 years. The asset has no expected residual value.
Ignore income taxes. The accounting rate of return based on the initial investment is
________.
A) 11.11%
B) 16.67%
C) 33.33%
D) 44.44%
When preparing segmented income statements, fixed costs controllable by others, and
not the segment manager, include ________.
A) depreciation on building used by a segment
B) local advertising costs for a segment
C) local promotion costs for a segment
D) salary of supervisor of sales staff for a segment
Variable overhead efficiency variances are unfavorable when ________.
A) the actual cost-driver activity exceeds the standard activity allowed for the actual
output
B) the actual cost-driver activity is less than the standard activity allowed for the actual
output
C) the actual cost-driver activity exceeds the standard activity allowed for the static
budget output
D) the actual cost-driver activity is less than the standard activity allowed for the static
budget output
What is the 80-20 rule used when selecting cost allocation bases for the budgeted
overhead rate?
A) 80% of the cost-allocation bases drive 20% of the overhead costs
B) 20% of the cost-allocation bases drive 80% of the overhead costs
C) 80% of the overhead rate is determined by 20% of the cost-allocation bases
D) 20% of the overhead rate is determined by 80% of the cost-allocation bases
An IMA ethical standard states, “Each member has a responsibility to disclose delays or
deficiencies in information, timeliness, processing or internal controls in conformance
with organizational policy and or applicable law.” This statement comes from the
________ standard.
A) integrity
B) confidentiality
C) competence
D) credibility
Which of the following statements is NOT a benefit of decentralization?
A) Lower-level managers are able to make faster and better decisions on local decisions
than higher-level managers.
B) By delegating decision-making authority to local managers, higher-level managers
free up time to deal with larger issues and fundamental strategy.
C) Local managers can develop management skills.
D) Managers in decentralized units may spend time negotiating transfer prices for
goods transferred between units.
Noonan Company used regression analysis to predict the annual cost of indirect
materials. The results were as follows:
Indirect Materials Cost
Explained by Units Produced
Constant 4,200
Standard error of Y estimate 2,300
R-Squared 0.84
No. of observations 22
Degrees of freedom 20
X Coefficient 2.30
Standard error of coefficient 2.70
The variable cost per unit of product is ________.
A) $0.84
B) $1.00
C) $2.30
D) $2.70
Under the traditional approach to cost allocation, the costs in each cost pool are
allocated to a product in proportion to the product’s usage of the ________.
A) available capacity
B) budgeted capacity
C) cost-allocation base
D) cost pool
On January 1, Latinovich Company paid $16,000 for rent. The rent covers the period
January 1 through April 30. Latinovich Company recorded Prepaid Rent of $16,000.
What is the balance in the Prepaid Rent account on April 1?
A) 0
B) $4,000
C) $8,000
D) $12,000
Under accrual basis accounting, research and development expenses for new products
are recorded as ________.
A) assets and written off systematically over the expected life
B) assets and expensed when paid in cash
C) assets and expensed when the related products are sold
D) expenses immediately
Customer profitability does NOT depend on ________.
A) gross margin on products purchased by customer
B) cost of order changes
C) cost of sales returns
D) transfer prices between producing departments
A decrease in either capital turnover or return on sales, without changing the other, will
also ________ the ________.
A) decrease; gross book value of long-term assets
B) decrease; return on investment
C) decrease; cost of capital
D) decrease: net book value of long-term assets
When determining the cost of a product, which of the following costs is often not
allocated?
A) Customer Service Expense
B) Research and Development Expense
C) Marketing Expense
D) Administrative Salaries Expense
The following information is available for the Paul Ryan Company:
Sales for year $150,000
Average invested capital for year $156,250
Return on investment 10%
What is the return on sales?
A) 10.00%
B) 10.42%
C) 62.50%
D) 100.00%
Potter Company’s expected sales for April are $29,000. Other information follows:
Budgeted Operating Expenses Amount
Wages $4,000
Advertising 1,680
Depreciation 1,440
Rent 2,560
Promotion 5% of sales
All cash expenses are paid as incurred. What are the expected total cash disbursements
for operating expenses for April?
A) $6,240
B) $9,680
C) $9,690
D) $11,130
Marian Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the cost of the finished goods ending inventory?
A) $48,000
B) $50,000
C) $54,000
D) $58,000
Schaefer Company has no beginning and ending inventories, and reports the following
data about its only product:
Direct materials used $200,000
Direct labor $80,000
Fixed indirect manufacturing $100,000
Fixed selling and administrative $150,000
Variable indirect manufacturing $20,000
Variable selling and administrative $60,000
Selling price(per unit) $50
Units produced and sold 10,000
Schaefer Company uses the contribution approach to prepare the income statement.
What is the contribution margin?
A) $100,000
B) $140,000
C) $200,000
D) $220,000
An investor in securities accounted for by the equity method has the following
information available at December 31, 2012:
Market value of securities $10,000
Acquisition cost of securities $8,000
How does the investor report the change in market value on the securities at December
31, 2012?
A) adjustment to Investment account
B) unrealized gain of $2,000 on income statement
C) adjustment to ” other comprehensive income” account
D) not reported
The first step in preparing the master budget is the ________.
A) cash budget
B) capital budget
C) operating expense budget
D) sales budget